Ann: Binding Off-take & Downstream Processing Agreements-PLS.AX, page-97

Pilbara Minerals up on offtake deal
Stuart McKinnon - The West Australian on July 4, 2016, 9:39 am

Drilling at tthe Pilgangoora lithium-tantalum project in the Pilbara. Picture: Pilbara Minerals.
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Shares in Pilbara Minerals were up after the aspiring lithium producer announced a binding offtake and downstream processing agreement with a Chinese company.


The deal involves the initial supply of 140,000 tonnes of spodumene concentrate a year for six years, partnership in a future downstream processing joint venture and an $18 million cash injection.


The supply deal represents more than 40 per cent of initial annual output from Pilbara Minerals' flagship Pilgangoora project.


The company also announced additional off-take agreements were at an advanced stage of negotiation, with further announcements expected in the short term that would largely cover the balance of Pilgangoora’s anticipated initial output of over 300,000tpa of chemical spodumene concentrate.


Pilbara said it had also signed a binding memorandum of understanding with the unnamed Chinese off-take party to establish a downstream processing joint venture to produce a minimum of 20,000 tonnes of lithium carbonate and lithium hydroxide a year.


It is envisaged Pilbara would hold 50 per cent equity in the joint venture, which would utilise the technology, technical expertise and intellectual property of the off-taker.


The company indicated the plant was likely to be located offshore but not in China.


The offtake partner will also take an initial 3 per cent stake in Pilbara Minerals as part of a $17.75 million placement priced at 50 cents a share. The company could lift its stake in Pilbara Minerals to 5 per cent once a final investment decision is made on the lithium processing facility.


Pilbara’s managing director Ken Brinsden said the landmark agreement represented a major milestone for the company and underlined the importance of the Pilgangoora project as a globally significant hard rock spodumene resource.


“This crystallises the strong relationship we have developed with key off-takers over the past year and cements a long-term partnership with one of the significant players in China’s rapidly evolving lithium chemicals and battery industry,” he said.


“It also underpins the financial and commercial fundamentals of the project, providing us with certainty around a large portion of our product sales and imparting significant momentum to our product marketing process, as we look to finalise additional binding off-take agreements in the coming weeks and months.


“We are very excited by the downstream processing opportunity contemplated by the binding MOU signed as part of this agreement.


“The ability to manufacture high-value battery-grade lithium products through downstream processing has the potential to deliver significant additional value for Pilbara in the years ahead, with global demand for lithium-ion batteries expected to experience unprecedented growth over the coming decades.”


Mr Brinsden said the proceeds from the equity investment would further strengthen the company’s balance sheet as it moved to complete a definitive feasibility study on the Pilgangoora project by mid-August and complete project financing in the current half.


Lithium has become something of a glamour metal for investors in recent months, because of its use in batteries for electric vehicles.


Shares in Pilbara Minerals were up 7.7 cents, or 12.52 per cent, to 69.2 cents at 9.35am.

https://au.news.yahoo.com/thewest/wa/a/31979184/pilbara-minerals-up-on-offtake-deal/